EU finance ministers reached on Friday in Luxembourg preliminary agreement on the draft directive on tax avoidance, soothing but part of the proposal of the European Commission, and other input pushing over time.
The adoption of the agreement depends on whether anyone until Monday does not raise its opposition. The extra day consultation asked the two countries, Belgium and the Czech Republic. According to unofficial sources close to the meeting of the ministers that small Member States, such as Belgium and Austria, lobbied for the removal from the proposal’s most controversial legislation.
“There were doubts on the text among member states” – admitted in an interview with Polish journalists in Luxembourg finance Minister Paul Szałamacha. As stressed Poland reported no doubt, because our attention has already been included in the proposal.
“It’s a difficult proposition with a lot of technical aspects and the huge divergence of interest between Member States” – said at a press conference the Minister of Finance who has the presidency of the Netherlands Jeroen Dijsselbloem. He assured that the regulations – despite the changes – have a value. “If it were not, they would not be so hard to negotiate,” – he argued.
According to the European Parliament each year, EU countries lose 50-70 billion as a result of tax avoidance. Some countries are gaining, however, is that corporations are moving profits to them and are with them pay taxes, although they are much lower than in the country where it was earned profit of the company.
The European Commission in its January proposals pointed to the legally binding instruments, which are to help put an end to such practices and escapes from profits to tax havens.
Not all, however, obtained permission. Ministers rejected, among others, provisions on the so-called. cancellation clause. The point used by the Member States the principle exempt foreign income from taxation to avoid double imposition of tax on profit.
This practice can cause, that the income from dividends and capital gains is output from the EU to companies in tax havens, and then returns to the EU (theoretically already as taxed). In the EU alone due to the avoidance of double taxation on the profits tax is not levied. As a result, the money from which paid very little or no tax, legally return to “28″.
The finance ministers did not agree on the seal of the system, arguing that EU corporations would thus less competitive in the world.
The ministers also softened a proposal that would limit companies shifting profits to subsidiaries in tax havens. Originally, the EC proposed that the EU countries have the right to tax the profits transferred from the country where the tax rates are 40 percent. lower than in the EU. This threshold, however, was eliminated during the work on the directive.
The heads of the ministries of finance and they could not agree on when they should enter into force the rules on the limitation of tax credits in connection with interest that the company pay for the loan. Here also lies the possibility of tax avoidance and output gains. It happens so maybe when one company based in a tax haven lends another money, then recovers with very high interest rates (draining the same company profits and making it impossible to pay taxes).
“A favorite method + suction + profit is capitalizing the company with the debt . Later, through inflated interest rates occurs + + Pumping of income “- emphasized Szałamacha.
Here, the European Commission proposed limiting the amount of interest that can be deducted in the year. Several member states, including Belgium, Slovenia and Austria, requested that these provisions were introduced only in the case if the same agreement is concluded at the level of the OECD. Finally agreed, however, that they enter into force no later than 2024., Instead of the previously planned in 2019. (Unless you do it OECD).
With the Luxembourg Krzysztof Strzępka (PAP)
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